However, under “Recommended” The Investment Manage should provide a description of the product or service obtained through Brokerage generated from the Client’s account. So I interpret this mean: you have to disclose that you use soft dollars on transactions to purchase research reports and pay for Bloomberg terminals. Under recommended, you would describe what specific research reports you pay for and what a Bloomberg terminal does if the fees to pay for these things was generated from the client’s account
i dont know the answer. it was on the sample 2, but it was not asked directly–it was just listed in the item set. thats why i was trying to gauge the response here because i honestly had no idea, though i was leaning toward it being true.
boooooo, who does that.
sorry, i guess i should have specified that at the beginning
TheAliMan Wrote: ------------------------------------------------------- > However, under “Recommended” > > The Investment Manage should provide a description > of the product or service obtained through > Brokerage generated from the Client’s account. > Excerpt from CFAI text: ----- VI. Disclosure In addition to disclosure required elsewhere in the Soft Dollar Standards: Required A. An Investment Manager must clearly disclose, with specificity and in “plain lan- guage,” its policies with respect to all Soft Dollar Arrangements, including: 1. To Clients and potential Clients. An Investment Manager must disclose whether it may use the Research to benefit Clients other than those whose trades generated the Brokerage. This disclosure must address whether the trades generating the Brokerage involved transactions conducted on a principal basis. 2. To Clients. An Investment Manager must disclose (i) the types of Research received through Proprietary or Third-Party Research Arrangements; (ii) the extent of use; and (iii) whether any affiliated Broker is involved. ----- So, from 2) it seems pretty clear to me that you _must_ disclose the types of research, ie the services and products obtained from soft $ arrangements. I’m on the “true” side now.
tvPM Wrote: ------------------------------------------------------- > my false answer is based on this, I have never > heard someone say to me: > “your commissions will help pay for our bloomberg > terminals for research” There are many things in text which are not implied in real market. How about no transaction cost, taxation etc? Will Scottrade or any other broker would allow you to buy security without commission?
still false, the statement says disclose the services and products, the CFAI text says the types of research received, different and same. Overall, this question is bogus. Movin’ on.
yes but those are theories…this is a simple question. I understand what you are saying boston, just saying the statement isnt worded 100% true, so I say false. Anyway, lets hope it doesnt show on the exam, cheers
False. See below. CFA Institute Soft Dollar Standards 2009 Modular Level II, Vol. 1, pp. 128-129 Study Session 1-3-a Defi ne “soft dollar” arrangements and state the general principles of the Soft Dollar Standards. Natali stated Principle 1 correctly. According to the Soft Dollar Standards, the fi rst principle is that brokerage is the property of the client. The second fundamental principle states that investment managers have an ongoing duty to ensure the quality of transactions effected on behalf of its Client, including seeking to obtain Best Execution; minimizing transaction costs, and using Client Brokerage to benefi t Clients.
This may not the fundamental principal but I think it still holds true. You have to disclose what you are doing from their money is asked by them
@huc3, I don’t see how that answers the question - have you read paragraph 2 of the excerpt I posted? @tvPM: You say “false” because the standard talks about research and the statement about products and services? That’s of course an interpretation question, but I believe these are to some extent interchangeable here. For example, a Bloomberg terminal classifies as research, if I’m not mistaken.
naze_duck Wrote: ------------------------------------------------------- > @tvPM: You say “false” because the standard talks > about research and the statement about products > and services? That’s of course an interpretation > question, but I believe these are to some extent > interchangeable here. For example, a Bloomberg > terminal classifies as research, if I’m not > mistaken. right. My difference in opinion is saying: “I use your brokerage to pay for research reports on small cap stocks” instead of saying “I use your brokerage to pay for Bob Schmidts monthly analyst report on Eddie Bauer and for the Super Allocator software version 2.9 I have in the back room”. Types of research, not services and products. Not saying I am correct, just saying my answer is as valid as saying they are the same thing.
You’ve got a point there. The CFAI text also says that the level of detail is a bit of a judgment call.
I remember the question was asking about Fundamental principal#1 and #2. A bit confusing, can someone post the original question?
tvPM Wrote: ------------------------------------------------------- > naze_duck Wrote: > -------------------------------------------------- > ----- > > > @tvPM: You say “false” because the standard > talks > > about research and the statement about products > > and services? That’s of course an > interpretation > > question, but I believe these are to some > extent > > interchangeable here. For example, a Bloomberg > > terminal classifies as research, if I’m not > > mistaken. > > right. My difference in opinion is saying: > “I use your brokerage to pay for research reports > on small cap stocks” instead of saying > “I use your brokerage to pay for Bob Schmidts > monthly analyst report on Eddie Bauer and for the > Super Allocator software version 2.9 I have in the > back room”. > > Types of research, not services and products. Not > saying I am correct, just saying my answer is as > valid as saying they are the same thing. Don’t you love the CFAI curriculum in all its theoretical/unpractical glory? 